Can the BRICS avert disaster in Argentina?

South America's second-largest economy could become an important part of the multipolar world – and at the same time solve its own crisis. However, there are a number of obstacles to overcome along the way, not least the upcoming elections that could bring US-loyal forces to power.

Argentina recently announced that it would adopt the Chinese yuan instead of the U.S. dollar in its trade with Asian giant China – the latest development in a broader global process of de-dollarization of world trade.

This comes at a time when Argentina is pushing to officially join the group of BRICS countries. According to its own statements, the country has the support of Brazil and India, Russia and China had also hinted at possible support in the past. Argentina is the second largest economy in South America and has considerable potential to contribute to the BRICS. However, the country is also in the throes of an increasingly extreme economic crisis, with runaway inflation reaching new highs every week.

Can a multipolar financial system help struggling economies like Argentina? Can the abandonment of the dollar and membership in the BRICS save the country from a possible catastrophe? Yes. But only if Argentina stops vacillating back and forth in its economic and foreign policy decisions.

Dollar dependence as a source of Argentina's economic problems

The economic turmoil in Argentina has reached desperate proportions due to the enslavement of the debt to the International Monetary Fund, the lack of access to dollars and a historic drought that has taken its toll on important agricultural exports. While the official exchange rate to the U.S. dollar is 222 pesos for $1, the "dollar blue," the unofficial rate offered on the black market, has reached up to 500 pesos in recent days. For comparison, in 2014, under left-wing President Cristina Kirchner, the official rate was 8 pesos for $1, while the unofficial rate was $12–$14.

Annual inflation is peaking at 104 percent, and Argentines have tried to fight it by investing their savings in U.S. dollars and even cryptocurrencies. However, the crypto market is not as optimistic as it was a few years ago, and the Fed's interest rate hikes, as well as speculation within Argentina, have made access to the dollar very difficult and expensive. Even more serious is the fact that the colossal debt that the country has accumulated with the IMF is denominated in dollars.

Argentine economist Gisela Cernadas, who now works in China for Dongsheng News, spoke exclusively to RT and explained the dangerous situation caused by dependence on the dollar:

"Argentina has been suffering from a structurally unbalanced current account for some time. This means that the country needs more US dollars to function than it has. In order to carry out its productive activity, Argentina needs immediate inputs that must be imported, such as machinery and equipment that must be imported in dollars. So the more Argentina wants to produce, the more US dollars it needs. As a result, this structurally unbalanced current account is putting pressure on the foreign exchange market."

Better times in sight?

In this context, the move to de-dollarize trade with China is clearly positive, as it loosens the stranglehold of the US dollar on the country. It will also help protect central banks' foreign reserves.

"If some of China's imports are paid for with Chinese currency instead of the US dollar, this will reduce the pressure on the current account deficit," Cernadas said. "True, it will not solve the structural problem that the country needs more foreign exchange to produce and carry out its productive activities. But it will alleviate at least some of the demand."

The economist points out that in 2021, Argentina and China had a trade volume of $ 20 billion compared to a deficit of $ 7.4 billion. So the agreement with Beijing would definitely help alleviate the tense situation and deficits in US dollars.

The switch to the yuan in trade with China is already a reality. According to Argentina's Minister of Economy and Labor, Sergio Massa, over $1 billion worth of trade will be converted to yuan. The advantages of such a step and the integration of the Argentine economy into that of the BRICS countries are undeniable. A weakening of US-dominated financial institutions such as the IMF, of which the Argentines are victims, is also undeniable. But is this feasible?

The agreement with China demonstrates the government's commitment to a multipolar financial system. However, the political turmoil in the country means that the process could prove very difficult, even with membership in the BRICS.

Will accession to the BRICS fail because of the upcoming elections?

The current president, Alberto Fernández, traveled to Russia and China shortly before the Russian military operation in Ukraine. He made it clear that Argentina wants to be part of a multipolar world in which Russia and China play a crucial role. Since then, he has been ambiguous about his relations with Russia, unlike the governments of Brazil, Venezuela, Cuba, Nicaragua and Bolivia, all of which met with Foreign Minister Sergei Lavrov on his trip to Latin America a few weeks ago.

In addition, and perhaps most importantly, presidential elections will be held in Argentina in October, which could dramatically change the country's political landscape.

President Fernández has already announced that he will not run for re-election. In any case, the country's catastrophic economic situation makes it unlikely that he or any of his allies would win the election. Polls show that the most likely outcomes are either a challenge from the left, such as current Vice President Cristina Kirchner, who has criticized her own president's tepid attitude toward the IMF and on foreign policy issues. Or a challenge from the conservative right from Horacio Larreta.

Kirchner's governing wing would deepen Argentina's commitment to multipolarity, in line with its anti-imperialist ideology and track record of opposing the IMF. However, if the right were to come to power, they would revert to the slavish pro-Washington policies of ex-President Mauricio Macri and would likely withdraw from the bid for BRICS membership.

An even more extreme, but equally likely, scenario would be a victory for the "libertarian" Javier Milei. Milei is a media personality turned congressman. He currently leads the polls with around 23 percent, compared to 19 percent for the conservative right and 17 percent for the left. Milei is a controversial populist who describes himself as a "libertarian" and whose main proposal is the dollarization of the Argentine economy. This would mean that the U.S. dollar would rise to the national currency and the peso would be abolished. This would, of course, put an end to Argentina's role in building a future multipolar financial system once and for all.

All these are factors that the BRICS countries must take into account when discussing Argentina's membership in this bloc. The country's current political and economic turmoil is the result of the neo-colonial international financial dominance of the United States. But it remains to be seen whether Argentina can be part of the solution.

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